Chinese face global
competitors

Published: Saturday, May 27, 2000

BEIJING {AP} Having all but secured permanent access to American markets and entry to the World Trade Organization, Chinese leaders now face the task of turning struggling domestic industries and government bureaucrats into global competitors.

The obstacles are significant: fearful state companies and their political protectors, worries about worsening already bad unemployment and a communist leadership wary that economic reform may bring calls for political change.

"It is a Herculean task, but every indication we have is that the government is fully committed," said Patrick Powers of the U.S.-China Business Council, a trade lobbying group.

So far, the efforts have been mixed. Provincial politicians and their business regulators have been brought to Beijing to learn about WTO. On the agenda were such unfamiliar concepts as transparent rule-making and equal treatment of foreign and domestic companies. Foreign Trade Ministry experts are being sent for training to Washington and WTO headquarters in Geneva.

But Chinese leaders have closely guarded information about the market-opening concessions they have made to join WTO. Copies of the landmark trade deal Beijing reached with Washington six months ago have been restricted to senior officials, Western diplomats said.

The secretiveness has lent credence to doom-saying WTO opponents. Han Deqiang, an economics professor and author of the anti-WTO book "Clash," predicts that local industries will be devastated once foreign firms get freer entry to Chinese markets.

Forecasts circulating among foreign embassies in Beijing also suggest near-term gloom: Once China drops tariffs and enlarges quotas on wheat and other agricultural products, as it has promised to do, grain prices will drop and incomes will fall, forcing millions of farmers off the land.

Already cities can't cope with the 100 million or more rural migrants seeking work. A Ministry of Agriculture think tank estimates that in five years, 400 million rural Chinese won't be needed on farms. That's besides the 12 million urban workers the government conservatively estimates are unemployed.

Despite those odds, China's reform-minded leaders are betting the WTO will lure foreign companies, investment and technology and prepare staid state-run industries for the rough and tumble of free markets. The result, they expect, will be a more efficient economy generating more jobs.

A vote in the U.S. House of Representatives on Wednesday to end combative annual reviews of China's trade status, giving it the permanent trading rights enjoyed by most countries, boosted Beijing's WTO bid. With the Senate expected to vote "yes," China quickly declared on Thursday that it would wind up negotiations with the five remaining countries whose approval Beijing needs to join.

China's chief WTO negotiator put the case for freer trade to state industry leaders. Speaking in Shanghai on Thursday, Long Yongtu said opening up the sensitive telecommunications and banking sectors would give domestic firms better services. He also noted that WTO rules allow for changes to be phased in gradually.

"The opening up should not be an overnight change. A quick act will bring about a backlash that will be detrimental to the world's economic growth," a state media report quoted Long as saying.

Among the reformers' chief concerns are the local politicians who have fiercely protected hometown companies even from other Chinese firms. Shanghai, with a Volkswagen plant, and Hubei province, with a Citroen venture, have imposed taxes and other barriers to keep out cars that were not locally produced.

To make sure they and bureaucrats at all levels of the government live up to China's WTO promises, the United States is setting up a special team to monitor compliance.

Trading partners also are counting on Chinese self-interest to prevail. With foreign companies to be allowed to import and sell directly for the first time, Chinese consumers stand to benefit from cheaper and better goods and services.

"Chinese individuals will have incentives to get around restraints on trade that local officials might want to set up," said Barry Naughton, a China expert at University of California-San Diego.

In addition, local politicians are only interested in protecting industries that make money, Naughton said. That will create "a 'reform-or-die' consciousness" among local officialdom.

Mindful of China's spotty record on enforcing agreements, the State Supreme People's Court is trying to make judges, who have been susceptible to corruption, more independent from local governments.

"It shows an increasing willingness of the leadership to be in step with international norms," said Qiao Gangliang, a Beijing-based attorney.